What's the future for coalition programs?

Fly Buys in Australia is going through some changes as leading tenant Coles looks to take on its competitor's Woolworths tie up with Qantas Frequent Flyer.  Woolworths now has 2.7 million customers in its Everyday Rewards program while Qantas Frequent Flyer has 5.4 million members.  Their tie up is expected to come to market in the middle of 2009.

Woolworths customers will be able to earn points in the Qantas Frequent Flyer program.  The revamped Qantas Frequent Flyer program now offers more than just flights.  Since the middle of 2008, it has become a one stop shop offering merchandise, gift cards and experiences.for redemption.

 

In New Zealand, long time tenants of the Fly Buys coalition program Telecom and Ezibuy (who were part of the program when it launched in 1996) left the program in 2008.  Now Shell, which owns 25% of the Fly Buys company, is looking to sell it's stake along with 230 petrol stations and it's investment in the New Zealand refining Company at Marsden Point.  There are 4 shareholders of Fly Buys New Zealand; Shell, Foodstuffs (operator of New World), IAG (State Insurance and others) and BNZ. 

Arguably, Fly Buys customers spend more on food (Foodstuffs - New World) and more often than they spend on credit cards (BNZ) and insurance (IAG).  Even allowing for the host of other places customers might earn Fly Buys points, food purchases at New World must be a significant source of most customer's accrued points balances. 

New Zealand's other major supermarket group (about 50% market share) Progressive Enterprises has grown the chains at which it's competing OneCard earns discounts and points from Foodtown in the early days to incorporate Woolworths and now Countdown.   One of the potential buyers of Shell's quarter share in Fly Buys is none other than the owner of Progressive Enterprises - Woolworths Australia (according to ABN Amro Craigs broker Peter McIntyre on 14th May).

To keep this interesting, Shell New Zealand has the fuel discount offer (earn cents off per litre) with the Progressive Group.  

With such a lot happening to Fly Buys on both sides of the ditch, it's difficult to find any precedent globally that might be instructive for us.  The best I've been able to find is the long running battle between Tesco in the UK and it's rival Sainsburys.   

The Tesco Clubcard (the Grand Daddy of all grocery loyalty programs) might be likened to Progressive's Onecard program.  Points and discounts are earned by shopping in the store and convert to vouchers and coupons which the customer spends in the store.  New World's use of Fly Buys might be likened to Sainsbury's use of the Nectar loyalty program - a coalition program like Fly Buys. Points earned by shopping at any Nectar outlet convert to benefits like those in Fly Buys - gift vouchers, goods and other rewards.

Verdict Research in the UK believes that the Sainsbury's Nectar card has not worked well.  However their senior analyst Malcolm Pinkerton reckons with Tesco upping the stakes "That should change now"